It is a great honour for me to be here at the heart of the American Federation. I want to thank you for your hospitality as we thank President Trump and First Lady Melania Trump and for the very warm welcome and hospitality accorded Lucy and me during our visit.

Now both our countries are federations and indeed our federation and our Constitution were in no small measure inspired by yours. It's why some political scientists describe our system of government - which is a parliamentary system as you know - as being "Washminster" a combination of Washington and Westminster.

It works very well but as I said to some of you last night I don't know whether this is true here but complaining about the Australian Federation is like complaining about Switzerland's Mountains. So work with it.

And we're joined by our counterparts, your counterparts the Premiers and Chief Ministers of our states and territories. Now our two nations are Federations of great states and each is so much greater than the sum of the parts.

As it says on the Great Seal the United States, on the scroll carried in the beak of the American Eagle. E pluribus unum - out of many, one. And looking around the room I am struck by the sheer diversity of ties that bind our two countries.

Governor Herbert of Utah where an Australian mining company Rio Tinto's Kennecott Bingham Canyon Mine has generated more exports income and employment than any other private sector operation. And Chairman Sandoval, in your state, Australian graduates are setting up an unmanned aerial vehicle delivery service through a company called Flirtey working with the University of Nevada.

They've made the first regulator approved deliveries of emergency medical supplies and retail goods for 7-Eleven and I'm told they're working with NASA to sort out the details of air traffic control.

Now as you said, Governor, our relationship as proud and independent federations really came of age 100 years ago on the battlefields of the Western Front in World War I. You can read in the letters and diaries of our battle hardened soldiers, our diggers, how they marvelled at the arrival of the Sammies as they called them with their enthusiastic faces and extraordinary looking equipment. And your Sammies did not take long to win respect and admiration from the Australians. They fought their first true offensive together with Australian troops at the Battle of Le Hamel.

At the time this was arguably the most sophisticated joint operation in history involving air drops, artillery and a line of British tanks. It was the first time American soldiers had served under foreign command in an offensive operation and under the leadership of our greatest General John Monash. Monash Planned for them to take the village of Hamel in 90 minutes. They did it in 93 minutes and he chose the Fourth of July to do it.

America's decisive intervention in the Great War marked its arrival as a global superpower with both moral and realist global interests.

President Woodrow Wilson proclaimed this was the war to make the world safe for democracy. A doctrine of principled realism. The Battle of Hamel was a turning point that put the German army on the defensive right up until Armistice Day and for our two nations it was the beginning of a hundred years of mateship. A hundred years in which we fought alongside you in every significant conflict forging unbreakable trust through the act of defending each other's liberty and guarding each other's backs.

We think of the personal bonds that were formed as a million American troops crossed our shores during World War Two. Layers upon layers of institutional ties that have been forged and strengthened since we sealed our alliance with the ANZUS treaty of 1951.

In more recent times, in the skies over Syria our combat pilots have fought together under the leadership of American commanders with the shared objective of defeating Islamist terrorism.

We've been side by side in Afghanistan for 16 years, our longest military commitment, and in Marawi, in the southern Philippines, our forces provided game changing support to the armed forces of the Philippines to subdue an ISIL backed insurgency in that city.

And every day our intelligence agencies are demonstrating the deepest possible commitment to each other by sharing sensitive information saving American and Australian lives. Just last year in Sydney, our intelligence agencies, our respective intelligence agencies and police working with our friends in Israel, enabled us to disrupt an ISIL plot to bring down a passenger aircraft. An A380, hundreds and hundreds of people would have died.

I can tell you that our intelligence cooperation with the United States and other partners save lives right around the world where ISIL has had similarly dark intentions.

That's what the alliance means today.

It is a means for maximizing our manoeuvrability and independence not constraining it. Networks of personal trust strengthened and expanded over generations and all underpinned by the deepest possible alignment of shared political values and this is the genius that really unites our two nations.

We define our national identities, Australia and the United States, we define our national identities, not by race or religion or ethnicity but rather by commitment to shared political values of freedom, democracy, equality, the rule of law, mutual respect.

Patriotism is not tribalism or nationalistic chauvinism, it's not about demonstrations and power and prestige and subjugation.

As George Orwell so brilliantly observed in 1945 true patriotism is a shared commitment to a way of life that is guaranteed by the institutions of democracy and the rule of law - institutions which are accessible to all.

But as Governors Bullock and Sandoval and I were discussing earlier, rarer around the world than you might think.

Now since the Second World War the United States has spread these liberal norms and principles to build an international system which has tempered the exercise of raw power and guided global cooperation.

This remarkable system which obliges nations big and small to play by those rules and to respect each other's sovereignty has enabled our collective security and prosperity for the entire post-war period. The extension of the system after the Cold War ended has enabled the greatest burst of economic growth, innovation and human advancement the world has ever seen. Australia has supported and reinforced and occasionally led this process at every step of the way.

But we know we cannot take any of it for granted.

Our path the Indo-Pacific region has enjoyed so much peace and prosperity for so long that there are some who forget that none of it would have been possible without the sheet anchor of American commitment and strategic power.

And that commitment is as important now as it has ever been. American commitment has come at a cost, paid in blood and treasure, and we understand that the American people expect others to pull their weight, as we do and always have.

My government is investing in the largest revitalization of our armed forces, in the air, on the land and on the sea, in the cybersphere in peacetime history.

Our defence spending is on track to reach two per cent of GDP by 2020. And in these uncertain times we should all be thinking about what more we might contribute. And we acknowledge the sense of frustration felt by many Americans that not all countries are contributing to efforts to reinforce and strengthen the open trading system that the United States has helped create for our collective benefit.

We have no objections to WTO consistent enforcement actions against behaviour that flouts and thereby undermines agreed international trade rules.

We want to work with you to improve the WTO and make it a more effective forum for driving trade reforms and ensuring full compliance with the rules. And we will maintain a dialogue on how our respective systems protect technologies and facilities integral to national security while ensuring our markets remain open and transparent.

Now the rules, the norms, the institutions that enable freedom security and opportunity have been painfully difficult to build. But easy to break.

At the Shangri-La dialogue in Singapore last June, I warned that we cannot allow the framework of international law to be undermined. In November, I outlined an ambitious trade policy agenda and committed our nation, unreservedly, to the principles of open markets, economic freedom and the rules-based trading system.

We entirely understand and respect the President's decision to honour his election pledge to withdraw from the Trans-Pacific Partnership. But Prime Minister Abe of Japan and I were determined to keep that project alive and the TPP-11 will be signed next month in Chile.

We do not expect the United States to return to the TPP any time soon. But by keeping this important trade pact on foot we have created a live option which would otherwise not exist for a negotiated US return in the - a possibility which the President himself has referred to.

Late last year, my government released a foreign policy white paper which commits us to a far more active role in shaping the future of our region. We'll work with all our partners and friends to promote an open, inclusive and prosperous Indo-Pacific in which the rights of all states are respected.

And on December 7, I introduced into our parliament far reaching reforms to protect the integrity of our political processes from foreign interference.

Now whether it is terrorism, transnational crime or foreign interference the primary responsibility of government, all our governments, is to secure the safety of our people and our way of life. Security and Freedom are frequently presented as binary opposites as if there exists a universe which you could have one without the other.

These two principles are not mutually exclusive. They can be, in fact they must be, mutually reinforcing. The question is not what freedoms to forego for security, it's what security is required to enable our freedom.

Maintaining our security ensures we do not have to close our borders to people, capital and ideas but rather the very opposite. Maintaining our security allows us to sustain the enormous benefits that flow from our openness to the world.

Now our shared commitment to open markets, transparency and the rule of law has generated an enormous reservoir of trust between our businesses, consumers and regulators and trust enables commerce to flourish. We like your movies, services and capital equipment so much that our bilateral trade accounts are tilted deeply in your favour. In fact we haven't turned a bilateral trade surplus with the United States since President Truman, before I was born not that anybody's counting.

American companies that count for fully one quarter of all foreign investment in Australia they're contributing to the greatest jobs surge in our history with 403,000 new jobs added last year in Australia.

And it's a similar story on the side of the Pacific. We've just watched the U.S. economy add 2.2 million jobs last year. Unemployment is as low as it's been since the year 2000. Around 180,000 American jobs are the result of Australian investment here. The BlueScope Steel Group, for example, employs around 3,000 people across the United States.

While Austal, Australia's premier shipbuilder, employs over 4,000 Americans and its investment is growing all the time. It was an honour yesterday and a symbol of our alliance when the President announced that the United States Navy would name a future Littoral Combat Ship, to built at the Austal shipyard in Mobile, Alabama, the USS Canberra.

The American and Australian economies are thus helping each other to thrive. You know I will speak for all of the Australians when I say this. We find it impossible not to be constantly inspired by the restless energy of the American people. Always reaffirming the power of optimism, resilience and a relentless curiosity to find a new way and a new idea.

We both know that innovation is the key to productivity which enables economic growth and more and better paid jobs. Innovation and science are key elements in our economic strategy. Your governor from North Dakota, of course, was until recently chairman of an outstanding global Australian technology business operating here in the United States and of course right around the world.

So you understand that we have the same commitment to enterprise but your example is always an inspiration to us.

So many of the technologies that have transformed our lives, and so quickly, from GPS to social media to the hyper platform that has enabled them all, the internet, was developed and commercialised here in the United States.

Australia has made great contributions from Wi-Fi to the technology behind Google Maps. It's a long list, but the United States remains unrivalled when it comes to commercialisation and innovation. Pundits, of course, have been warning - they are very fond of dark predictions as you know - they've been warning that the US is running out of oil for nearly 100 years and yet thanks to innovation in horizontal drilling and fracking and of deepwater exploration, U.S. oil production has nearly doubled in the past decade.

I commend the NGA's focus under Governor Sandoval on the role that state governments can play in preparing the workforce for innovation and transformation.

The signing of a memorandum of understanding between the National Governors Association and the Council for the Australian Federation which is your counterpart will deepen collaboration in this and other areas.

New rounds of company tax cuts in both countries will lead to more investment, which in turn will mean more and better paid jobs. The IMF has lifted its global growth forecasts after the Trump administration cut the US company tax rate to 21 per cent. And we cannot deny the need to be competitive increases the urgency with which we are pursuing similar tax cuts in Australia. In Australia we are presenting legislation to reduce taxes for all businesses to 25 per cent we've already achieved a reform, bringing tax down overtime to 25 per cent for businesses with turnovers up to $50 million a year.

That's not a huge business I might add at $50 million a year but those businesses employ half of the private sector workforce in Australia. But we need to go further as you have done.

Now the flow of investment and technology is not just one way, far from it as you know. Our $200 billion defence capability bill is driving a new generation of Australian defence technology enterprises to integrate into the supply chain of US Primes like Boeing, Raytheon, Lockheed Martin and Northrop Grumman.

We want the integration of our defence industry supply chains to match the interoperability of our armed forces. So I'm encouraged to see that Australian companies have been awarded over a billion dollars in contracts to supply components for the worldwide strike fighter program delivering 2,400 jobs.

Those figures should double within five years. Our target is to become a top 10 defence industry exporter. I know state business leaders in this room are looking to leverage the Trump administration's commitment to infrastructure and so are our business leaders. Clearly our infrastructure companies thrive in this system of transparency and impartial rules that they enjoy each other's countries. Companies like IFM in Indiana, Transurban in Virginia, Lendlease all across the United States.

I'd like to see US and Australian infrastructure companies working together in other countries too. In places like Southeast Asia and the Pacific Islands where there is enormous need for high quality bridges, highways, ports, rail and telecom.

For this to work, however we need to get on with the post-war project of shaping an environment in which the most competitive and rule abiding companies can succeed. We all know that investing in smart infrastructure projects can drive a regional economy. A bridge to a port which connects to hundreds of other ports creates much more than the sum of its parts and in many cases government backing will be vital.

A good example is our recent commitment to build an undersea telecommunications cable which will ensure connectivity and bring new opportunities for our neighbours in Papua New Guinea and the Solomon Islands.

Our vision is for a single inclusive free trade zone of the Indo-Pacific. A region integrated under a common set of rules and norms that connect us all to one another and which will drive growth and job creation. It's vital that strategic competition does not create rival economic blocs. We look forward to partnering with all countries including the United States, Japan and China on those infrastructure projects that meet the criteria of transparency, fairness, accountability and market need.

That's also how we constrain large states from imposing arbitrary barriers and engaging in economic coercion against the small. Security and prosperity, they go hand in hand, but we need to shape the rules that are necessary to make this happen. We need to level the playing field for private sector companies, update the rules of the digital world and ensure greater transparency and stronger rule of law in a world which is often short of both.

And that's why, as I said, we backed the Trans-Pacific Partnership so strongly not just because of the market access it delivers - which is very beneficial creates jobs and investment but because it creates the rules of the road we need to match the economic journey we're embarking on.

Now Governors, honoured guests, it has been all too easy for the rest of the world to take America's exceptional contribution for granted.

If your long and hotly contested debates prompted partners around the world to take greater responsibility for their security and prosperity then they've served a useful purpose.

I know it's fashionable to call the passing of American leadership and condemn democracy into a fate of inexorable decline. Let me tell you that's not what I'm hearing from our trusted partners in our part of the world.

Nor is it what the Trump administration is engraving into its most important policy statements.

Your national security strategy, and its organising doctrine of principled realism, is a manifesto for upgrading a liberal rules based system not breaking it. Your national defence strategy signals a reinvestment in American hard power and the alliance system which amplifies its reach.

President Trump's nomination of Admiral Harry Harris as Ambassador to Australia underscores this message. American leadership in the world is in our interests but it is in yours too. I stand with generations of American leaders and seen its global alliance network not as a burden but as a force multiplier that first and foremost has enabled American prosperity and security.

As President Trump himself reminded us. America first does not mean America alone.

Now so much has changed in the last century in the last hundred years of mateship. We are after all living at a time when the pace and scale of change is without precedent, and I don't doubt that this will continue in the next century but our alliance, our partnership, our mateship. Whether it is a century ago or a century hence will remain built on a foundation of shared values which are timeless but never more timely.

Values as Australian as they are American. Freedom, democracy, the rule of law and the spirit of enterprise which they enable.

Thank you very much.

Q&A at the National Governor’s Association Winter Meeting

QUESTION:

We hear a lot about disruptive technologies. How do they reshape economies together both at the national and subnational level?

PRIME MINISTER:

Well thank you very much. I think government obviously has to lead by example. It is very critical that we do that. I think we need to ensure that everybody understands that in this age as, I've said of change which is unprecedented both in its scale and its place it's worth reflecting on that. You know, how so many of the technologies which have been so transformational are yet so recent. It's the scale and the pace of change it has no counterpart in our history.

So that means given that reality and that environment we can't change. We have to make sure that we make it our friend. In other words we have to make volatility our friend not our foe and that means that clearly. The job you start when you get out of school or college may not be it for the rest of your life may not be there in 20 years time.

So you've got to be able to keep retraining, reskilling that is a critical point. We have to ensure that growth and the advantages that we get from technology do not leave individuals or regions behind. I think that has got to be the key focus but we have to recognise the tenor of the times in which we live and even if we don't like them recognise we can't change them and say how can we work this to our advantage?

MODERATOR:

Thank you Mr Prime Minister. Governor Bullock has the second question.

QUESTION:

Thank you. Mr Prime Minister, picking up on exactly where you're ending and that's transformative technologies, create so many opportunities for our states and our nations. But there's also challenges both socially, economically and security wise. How's Australia, addressing some of the challenges be it workforce or be it some of the things that are happening everywhere on the one hand we have transformative technologies but on the other hand there are folks that feel like they been left behind.

PRIME MINISTER:

Well thank you. There's no substitute for strong economic growth. That's the first point. I said the pace and scale of change is without precedent but there have been obviously big technological changes in the past. You know if we go back to 100 years ago when our soldiers were fighting together in France, the very large percentage of Americans were engaged in agriculture.

I'm not sure what the percentage was but a very substantial percentage in that period. Nowadays, it's only a few per cent, as it is in Australia, that's come about because of technology.

So all of these changes occur that you need to have strong economic growth to create the new opportunities. This is where frankly trade has been very important as the Premiers here know particularly Annastacia Palaszczuk from Queensland and Mark McGowan from Western Australia.

We had a huge commodities boom, you know once in a generation I think you said, Premier from Western Australia, Mark McGowan, you said it was a once in a lifetime. Well, maybe, hopefully you'll have a long life and you'll see another one. But the point was however that that caused the great boom and then there were big transitional adjustments there. Some regions were hit very hard.

Having said that because of the opportunities for all of the free trade agreements we have created, we've seen stronger growth in our regions and that has been I think that has been one of the features that has perhaps cushioned the impact of what otherwise would have been a very hard landing.

So having many strings to your bow, having a diversified economy is particularly important.

QUESTION:

I have the second question and with regard to President Trump he's started a national conversation with regard to infrastructure and I think I speak for all of the nation's governors when we all appreciate the fact, and the Premiers, that infrastructure is a constant challenge with regard to mobility and safety for our constituents. I know that given that's a conversation in Australia as well. How do you work with the Premiers with regard to infrastructure and what is the approach that is happening in Australia.

PRIME MINISTER:

Well I'm sure all the premiers and Chief Minister's will agree. The Federal Government works with them on infrastructure entirely to their absolute satisfaction. Never have a complaint.

In fact, as I said last night we have meetings every couple of times a year called COAG meetings - Council of Australia Government Meetings between the Premiers and Chief Ministers and the Federal Government and we find these meetings so much fun that we decided to go on this trip together and hang out even more.

Let me answer that question in a way that I think you may find helpful. Firstly, our Premiers and Chief Ministers have an enormous experience in this area. I'm just looking directly at Gladys Berejiklian the Premier of New South Wales. There is an enormous infrastructure boom going on in NSW, the NSW Government and of course her predecessors, Liberal Premiers Mike Baird and Barry O'Farrell really set in train a big infrastructure commitment in New South Wales, which is of course where Lucy and I live as well.

Other premiers have made great achievements as well. So a lot of reservoir of experience there. Historically the Federal Government has made grants, you know just literally written out cheques for contributions to roads. So there are some roads that I was inspecting in Queensland recently in Annastacia Palaszczuk’s state where the Federal Government is contributing 80 of the cost others where it is contributing 50 per cent of the cost and so forth.

But we have to get smarter about the way we invest in infrastructure. We have had a practice which Ambassador Hockey started when he was our Commonwealth Treasurer, Federal Treasurer, of encouraging states to recycle assets and to sell state owned assets.

Dan Andrews from Victoria a reasonably sold a port at a very good price too. And recycle those assets sell them and then deploy the money into new infrastructure.

The State Government is often very well placed to take the construction risk and then having got an asset built and underway, to then be able to sell it to pension funds and superannuation funds that are looking for that kind of reliable return.

But I think we also have to do more to capture value. Now toll roads are fairly straight forward. From a financing point of view. We have a lot to learn in Australia and in many respects the experience in America is very instructive, on how to capture value out of rail. We have to start looking at urban rail generally as a property deal.

And develop the means to capture some of the value or the appreciation of value to real estate that's occasioned by the construction of the rail. Some of your cities have been very innovative in doing that and we've been looking very carefully at that.

In other words we need a lot more infrastructure. We need to be smarter about how we go about it. We need to look at every angle and one of the reasons, that's one of the reasons I've set up a innovative project financing unit in our own federal government getting to make sure that we do everything we can to get the maximum dollar invested. Stretching the taxpayer dollars as far as we can for the benefit of infrastructure right around the country.

QUESTION:

Our individual states doubtless each state leader and Governor has a keen or intimate of that state's relationship with foreign countries. For example I know between 2016 and 2017 Australians visiting Montana increased 41 per cent. I'm hoping in 2018 that will double so I'd like to invite you there. But also we know, what our trade relationships are like how much state dollars in Montana both exports we have to Australia and imports. Recognising that trade policy is set at a national level but it's the local communities or the subnationals that really see the on the ground impacts trade policy, how in your perspective can we better help local communities understand impacts trade policy and what this does for us.

PRIME MINISTER:

Thank you Governor. I think the challenge for us as leaders, as political leaders in particular, is to ensure the lure, the easy lure of protectionism doesn't overtake us. The way we make the case in Australia we just say, "Look at the evidence." You know 403,000 jobs last year. Largest growth in our history. Fact. 16 months of continuous monthly jobs growth, the longest for at least 40 years plus. I don't think we found a period where there's been a long continuous jobs growth. All of that is supported by having bigger markets, greater opportunities.

Now we don't presume to give - we're happy to share our experience, we certainly don't presume to give advice. We're flat out - all of the leaders here. Michael Gunner and Andrew Barr and the Premier's I've mentioned. We're all flat out are managing our own states and territories and responsibilities but you know, we're happy to offer you this. I think you have to just make the case that trade, more trade means more jobs, more investment, more exports.

I mean you look at the Northern Territory's experience, I mentioned Chief Minister Gunner a moment ago, you know the massive investment there and U.S. investment and Japanese investment in the oil and gas business. Particularly in the LNG business has created thousands of jobs and high quality jobs. It's exporting yes, it's trade but you can see the opportunities there.

If you go back to Queensland where I was recently giving a speech in Toowoomba which is a regional city to the west of Brisbane up on the Great Dividing Range - beautiful city - and it is at the heart of the Darling Downs which is a big agricultural area.

There is a new airport recently built there by the private sector, by the Wagner family, and that is now exporting the produce of the Darling Downs to put it on the dining tables of Asia. Some of the best produce in the world. Why we able to do that? Because of those free trade agreements. The TPP will enable us to do more of it.

That's what we've got to do.

So we are a medium sized, open economy. Trade is good. It means more jobs more investment for us and that's how we promote it. But other than offering our example we don't presume to give you political advice.

MODERATOR:

Thank you so much Mr Prime Minister for being with us today. Before you head back on this long journey, back to Australia we're excited to have you preside over the signing of a memorandum of understanding between the subnational leaders of our two great countries.

So we're going to go offstage as we reset. For that and we'll be back with you in a moment. Please again give a big hand to the Prime Minister.